Saturday Cup of Joe: a lending and tech(ish) newsletter

Friends & Colleagues,

SCJ68. Time flies when you’re having fun. Unless you’re a frog…times fun when you are having flies. Sorry, sometimes Dad jokes are unavoidable. The point is that this week went flying by. You’d think things slow down in the summer but we’ve had the opposite experience. Business development and regulatory exams have kept me busy for 2–3 weeks now.

And as you can see from the length of this week’s newsletter, there is a lot going on in both the financial markets and the real estate industry. The dog days of August are a thing of the past.


Anyone wanna grab a cup of coffee next week?


Challenge question: What could your company or team not do without you? Or put another way, what would your company immediately lose with your exit?


Interesting proposition: You can’t open Instagram without seeing some list of what “losers” do and what “winners” do. This week’s version is “dreamers” versus “high achievers”, which I appreciate as a potential dreamer. One thing I couldn’t resist was whether “high achievers” are, in fact, morning people? My gut tells me that it’s about discipline, generally, and not when your alarm clock goes off, specifically. But discipline in sleep means discipline in all areas. Do you agree? When does your alarm go off?


Commit to the book but write in chapters. This is good advice for anyone with a patience problem. Just because we can see the whole book doesn’t mean it’s a good idea to try to finish it in a day. Understanding the story, outlining the sources/index and building the characters all make for a successful book and a career can be thought of the same way. The link gives great leadership advice from someone who built a career in businesses entirely on relationships.

Detroit, Michigan, USA

Included below:

1. Director Cordray’s op-ed on arbitration clauses in consumer contracts (Of Interest)

2. Profile of HUD & Secretary Carson (Speaking of Washington D.C.)

3. Grab bag of articles on Detroit & Pittsburgh (NextBelt)

4. Millennials as consumers (Millennial Minute)

5. One man’s view of the American Dream (Walk the Talk)

6. A quick double standard on vacation homes (Valuable Lessons)

7. Quirky story of the week and the Quote

Hmmm. As seen on Ozy this week.

Of Interest: Complexity is not our strong suit. One obstacle to political and commercial accountability in this country is how difficult it is to get the whole story and how complex public policy and business decisions have gotten. Valid research and logical positions on both sides make it extremely difficult to pass law, make rules or enforce fairness in our system. I was reminded of this point again recently when the Consumer Financial Protection Bureau (CFPB) passed a rule based on authority from the Dodd-Frank Act barring financial institutions from including mandatory arbitration provisions in standard consumer credit agreements. Essentially, banks and individuals could still opt to arbitrate disagreements, if both sides agree, but banks cannot rely on arbitration clauses to defeat class action lawsuits. The lawsuit must go on. As a financial services attorney, I can appreciate both sides of this debate. When the House of Representatives reacted — passing legislation overturning or purporting to overturn the CFPB rule — I thought immediately about the right to contract and an open market. Consumers are not forced to request consumer credit contracts. We, as consumers, don’t have to sign on the dotted line for any product or provision we don’t want. Some entity would place a product in the market and become the “we’ll-let-you-sue-us-lender,” right?

At the same time, I understand the retort. Consumer rights groups and even the CFPB have said that, unfortunately, that’s not how things work in the real world and the truth is consumers don’t read the contract and instead sign agreements when they want (or need) a financial service and as a result feel pressured by the nature of the relationship. Goliath has the money and David is asking for some. In actual practice, consumers need to be protected even from their own lack of discipline to read or understand contracts. (And you wanted to immediately blame lawyers).

This week, the situation was further complicated when CFPB Director Richard Cordray published an op-ed in The New York Times. Relying heavily on the power imbalance to make his case, Director Cordray took one rhetorical step that I’d like to highlight. He claimed that consumers should always have access to the courts to sue banks because banks have access to representation and the courts to file and defend lawsuits. Cordray writes, “It is the height of hypocrisy for companies to say they’re helping consumers by closing off the very same legal option they use when they’ve been wronged.” To me that does not seem like a fair comparison. There are all kinds of reasons and all kinds of ways that corporate legal rights & activities do not compare to individual legal rights. There are reasons we have small claims court and minimum monetary claims to enter federal court. Despite what the op-ed implies, there are practical concerns with individual claims, particularly when they are frivolous. Obviously, the example of Wells Fargo ripping off thousands of consumers fits nicely into the Director’s argument because the conduct was so widespread and direct. Often the complexity and facts require individualized attention. Many financial services decisions and policies are based on the consumer’s individual credit or financial situation. Grouping consumers together for class actions often muddies the analysis of the conduct and lends itself to inflammatory language. Find one clear example of wrongdoing and the whole class wins. The incentives of that framework are not fairness and justice.

At the same time, corporations that use mandatory arbitration clauses as a risk mitigation tool to allow for careless procedures directly undermine the previous argument. If a financial institution includes a mandatory arbitration clause then shows no respect for the contract containing the clause based on bank or employee behavior, of course the consumer does not have to honor the contract language; however, that’s not the case the Director laid out. There is no standard or activity by which the bank losses the defense. The rule is a complete bar to the group lawsuit prohibition in consumer credit contracts. Again, we’re not good at nuance. It’s an all or nothing rule in an all or nothing climate.


Speaking of Washington, DC: On Thursday, a profile of HUD was published in ProPublica & New York Magazine, titled “Is Anybody Home at HUD?” In the current administration, according to the article, leadership undertook a “deconstruction of the administrative state.” Not surprisingly, HUD was at the top of the demolition list. What’s not clear is whether Ben Carson is participating in the dismantling or simply passive while those who control the purse strings execute the Trump Administration’s overall strategy (to the degree there is one). Alec MacGillis frames up the last few months at HUD going into detailed descriptions of internal discussions, speculation and Carson-attended events. On one hand, there are no new revelations here. On the other, it is interesting to see journalists both confirming assumptions many have been making about how HUD employees view Carson (not to mention what working day-to-day might be like). One thing I think a lot of people don’t know about HUD is the role the agency plays in the everyday lives of struggling Americans. “HUD, for all its shrinking stature and insecurity complex, has over time worked its way into the fabric of ailing communities throughout the country, a role that has grown only larger as so much of Middle America has suffered decline, and as the capacity of so many state and local governments has withered amid dwindling tax bases and civic disengagement.” By the end of the article, it seems it will be impossible to continue to fund the nation’s housing needs while rebuilding the agency through innovation and a necessity-is-the-mother-of-invention model. The more likely outcome is a social services imbalance (to put it nicely) that ends up costing taxpayers more later, in other areas of service, than properly funding housing while at the same time reorganizing HUD ever would have cost.


NextBelt: Not sure what office space or co-working space leases for in San Fran or Brooklyn, but in Detroit, you can get an interesting, historic space for $15/sq ft. In addition to the price, this historic building includes fiber optic internet through Rocket Fiber, a view of the Detroit River & Canada, even if it is in the shadow of the RenCen. Perfect place to relocate a startup if you ask me.

If you have more of a travel budget, or even if you don’t, Detroit is flying direct to Iceland now.

Perhaps it isn’t about Detroit (shocking, I know), but some other opportunities. Pittsburgh is reimagining the downtown business district. Parallels between Detroit and Pittsburgh abound. For more information on The D, this week Detroit Future City released a 139 page report covering all corners of the city.

· Detroit actually decreased population, moving from the 18th largest to 23rd largest city.

· 49% of Detroit’s homes are owner-occupied

· Detroit’s median home price is $19,070

· 37% of Detroit’s renters spend more than 50% of their income on housing

· Detroit has demolished approximately 12,000 homes for blight in the last 3 years

· 24 square miles of Detroit is vacant land (Detroit as a whole is 139 square miles)

· Park space is increasing, 25–35 year olds as a cohort of residents is increasing and new housing is coming online in the next 12–18 months (and more is needed).

Much of my argument around the NextBelt is that many people, especially young people, do not appreciate the value of smaller cities. One blogger took to to make the argument for New Haven, CT. Having moved from CT to MI, I can appreciate this argument and the larger trend that says young entrepreneurs appreciate the value of quality of life over status. In my mind, the arguments made for New Haven are true in Detroit and many #NextBelt cities.

#NextBelt update: I’ve previously written about the tiny house movement — from a vacation or leisure perspective — and I’ve profiled the tiny home movement in Detroit as a way to combat poverty and build financial literacy. This week PBS News Hour ran a report highlighting the tiny house neighborhood built by Rev. Fowler and Cass Community Social Services. There’s a video in the link if you are interested.


Millennial Minute: If you can get past the overexposure to the word “millennial,” there is a really interesting conversation going on about authenticity & experience over convenience & expense. Whether you are a millennial or a member of an older generation, I hear all the time from people who are sick of hearing “millennial.” Unfortunately, the world of clickbait and constantly updating content feeds will not release a trend gently or easily.

Fear not. Getting past the title often reveals what’s going on with young consumers, and if we’re willing to endure the tone of these articles, our businesses can learn a lot about how to lean into what we’re seeing.

Business Insider published a list of retailers (i.e. Macy’s, Applebee’s), products (i.e., napkins, beer, breakfast cereal) and even industries (i.e. golf, football, oil) that are not meeting the needs of young consumers. Of course, homeownership was also on the list at #8 though it seems clear, even in this piece, that younger folks are steering clear of homeownership for now but will likely come around long term. It’s not clear they’ll come around on Sears and Hooters long term. I loved the list because a) who doesn’t love lists and b) it made so much sense to me. Much of what was described was shopping experiences made intentionally impersonal to save money or intentionally cheap/easy to save time & money. What younger consumers demand is thoughtful and interesting products and services, even at an elevated cost. If you take exception to one or two items on the list, fine, but don’t miss the big picture here: If this is your target market now or in the near future for your business, focus on quality, experience and narrative when selling to this generation. The food service must be personal and considered high quality. The more friendly the product or service is to the population at large, the more likely you’ll find a connection there. Golf is a privilege sport that demands a lot of resources, not just from the golfer but from the community. Here’s a link to a podcast about the acreage and taxes associated with golf courses, particularly in California. And I’m a guy who really likes golf.

Younger consumers are concerned with community, resources and being fair participants in the market. Authenticity, value and responsibility stand to be extremely important in the next 20 years. How is your business poised to address these things moving forward?


Walk the Talk: More on the American Dream. Recently, Rob Chrisman’s Commentary quoted my Saturday Cup of Joe article highlighting Ryan Holiday’s analysis on buying a new home. His insight was sharp and helpful for anyone out there looking to message for the next generation. Holiday came back this week with another post about the American Dream. He wrote, “To me, the American Dream has always been relatively simple: The ability to live one’s life on one’s terms. That is: financially, recreationally, personally, and creatively.” I couldn’t agree more. Holiday makes the case for Texas. I write most weeks to make the same case, or a similar case, for the #NextBelt.

Find your story and commit to it.

For Holiday, it sounds like it was the perfect mix of rational (no personal income tax in TX) and emotional (land, animals and space). Every place has advantages and challenges. What I’ve often been writing about is not overlooking viable and even exciting opportunities in places like Detroit, Cleveland and Milwaukee because of false or misleading stereotypes or assumptions. The American Dream is the privilege of being able to write your own story. Or at least having more input into your story than almost anywhere else. I’m simply encouraging leaders and the next generation of creators to start writing and consider writing your story in interesting cities you may have previously overlooked. Let’s get writing.


Quirky find of the week: Unfortunately this week’s quirky story is somewhat controversial, but even without clarity on what happened, I think it’s worth sharing. Apparently the nets surrounding a salmon farm in the middle of the Bellingham Bay near Cypress Island, Washington broke, releasing over 5,000 farm-raised salmon into the waters with native salmon. From what I can tell, the fish farm blamed Monday’s eclipse for unusually high tides/water currents, which either shows impromptu creativity or risky chutzpah. On top of the public relations issue from the farm, I also question the WA Dept of Fish & Game announcing “no license, no limit, no restriction” for fishing these waters. Perhaps they have determined that’s the best method (and clearly they’d know better than I), but you have to assume that it will be difficult to control or manage that message once it’s out there. What a mess.


Valuable lessons in (un)expected places: It cracks me up how often we look at issues or questions today in a vacuum, particularly in the media but also in our organizations. We seem to believe that as long as what you’re saying is true for that situation and in that moment, it will always hold up, even if minor changes to the facts would totally disrupt the analysis. Let me give you an example. The Wall Street Journal published a column titled “What to Consider Before You Buy a Vacation Home,” and then, seemingly unknowingly, made the case against homeownership generally. For instance, the first “thing to know” is “buy for the right reason.” Why? “…the market is too unpredictable to expect to profit on a sale.” Check.

Another piece of advice — “don’t delude yourself about cost and profits.” Why? “…crucial considerations that can eat away at earnings such as cleaning, management, routine maintenance and repairs.” Check.

Some other advice throughout the article includes knowing the tax or financial implications of primary or secondary home purchase and bracing for the hard work of homeownership. While many of these are touched on in the conventional wisdom articles of first-time or primary homeownership, I still question how easy it is to write this article about second homes and how difficult it is to do similar analysis on general homeownership.


Quote: “The smallest good deed is better than the grandest good intention.” — Duguet

Bonus Content: Business Insider — Nordic looked at 18 of the coolest office spaces globally. And yes, Quicken Loans made the list. But there are some impressive/friendly spaces on this list.

Continued success,

Thinker, curious leader, once an attorney…always trying to answer well.